itc financial analysis

1. A PROJECT REPORT
ON
ITC Limited
One of India’s Most Admired and Valuable Companies

2. INTRODUCTION
Itc limited is a public conglomerate company head quartered in Kolkata .The Company is
currently headed by YogeshChanderDeveshwar. It employs over 26,000 people at more
than 60 location.
Rated by BCG amongst Top 10 consumer goods companies in the world in terms of total
shareholder returns (TSR) Suring 2005-2009.
Oneoftheforemostintheprivatesectorintermsof:
–Sustainedvaluecreation(BT-SternStewartsurvey)
–Operatingprofits
–CashProfits
Itc
is
the
onlyIndianFMCGCompanytofeatureinForbes
2000
List,
Acomprehensiverankingofworld’sbiggestcompaniesmeasuredbyacompositeofsales,profits,ass
ets&marketvalue.
ITC’s rankingamongst all listed private sector cos.
 PBT: No. 6
 PAT: No. 5
 Market Capitalization: No. 3
ITC Performance Track Record
In Rs crs.
1995-96
Net Revenue
2,536
PBDIT
584
PBIT
536
PBT
452
PAT
261
Capital Employed
1,886
ROCE %
28.4
Market Capitalization
5,571
Total Shareholder Returns %
Sensex (CAGR 95-96 to 12-13): 10.7%
Rapid Scale up of FMCG businesses…
2012-13
29,606
11,566
10,771
10,684
7,418
23,569
45.7
244246
17-yr Cagr 95-96 to 12-13
15.6%
19.2%
19.3%
20.4%
21.8%
16.0%
24.9%
26.4%

3. ITC’s Vision
Makeasignificantandgrowingcontributiontowards:
 Mitigating societal challenges
 Enhancing shareholder rewards
By:
Creating multiple drivers of growth while sustaining leadership in tobacco and
Focusing on triple bottom line performance
Enlargecontributiontothenations
Financial capital
Environmental capital
Social capital
Creating world-class brands for Indian Consumers

4. Financial Statement Analysis
Financial analysis is the process of identifying the financial strengths and weaknesses of the
firm by property establishing relationships between the item of the balance sheet and the
profit and loss account.
Users of Financial Analysis
Trade creditors
Lenders
Investors
Management
Financial Ratio Analysis
A Liquidity Ratioprovides information on a company's ability to meet its short−term,
immediate obligations.
A Profitability Ratioprovides information on the amount of income from each dollar
ofsales.
An Activity Ratiorelates information on a company's ability to manage its resources
(that is, its assets) efficiently.
A Financial Leverage Ratioprovides information on the degree of a company's
fixedfinancing obligations and its ability to satisfy these financing obligations.
A Market Ratio describes the company's financial condition in terms of amounts
pershare of stock.
Liquidity Ratio

5. Itc have high liquidity ratios, the higher the margin of safety that the company possess to
meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good
financial health and it is less likely fall into financial difficulties. Seen in all the years above
2013, 2012, 2011.
Current ratio indicates Itc's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough resources to pay its debts over the next 12 month.
Profitability Ratio
An increase in profit margin compared to the previous period's margin signals an
improvement in both operational efficiency and profitability means the company improved its
profits and efficiency. A margin higher than those of other companies or higher than the
industry average means Itc business performed better than those companies during that
period.
Activity Ratio

6. A high debtor turnover ratio implies either that the company operates on a cash basis or that
its extension of credit and collection of accounts receivable are efficient. Also, a high ratio
reflects a short lapse of time between sales and the collection of cash, while a low number
means collection takes longer.
A low inventory turnover ratio can be seen because of rescission but it is very well aligned
with FMCG industry average.
Leverage Ratio
A very high interest cover suggest that the company is not capitalizing on the relatively
cheaper source of finance (i.e. debt) and in such instances an increase in gearing ratio may
actually add value to the enterprise.
Interest coverage is an indication of the margin of safety it does not run the risk of nonpayment of interest cost which could potentially threaten its solvency.
Market Ratio

7. PE Ratios
Current Share
price
33.2
311.65
Generally, stocks that are expected to grow earnings will have a higher P/E, Itc companies
with high growth have a higher ratio. Itc with the higher P/E is said to be overvalued by the
market.
The share price should reflect a firm’s future value creation potential, greater value creation
can indicate greater future dividends from the company. A higher P/E ratio should reflect
greater expected future gains because of perceived growth opportunities and/or some
competitive advantages and/or lesser risk, but at the same time it indicates that the share price
is relatively more expensive.
Du Point Analysis
DuPont analysis tells us that ROE is affected by three things:
Operating efficiency, which is measured by profit margin
Asset use efficiency, which is measured by total asset turnover
Financial leverage, which is measured by the equity multiplier
ROA (%)
ROE (%)
ROCE (%)
Mar'13
23.55
36.21
52.45
Mar'12
22.65
35.58
51.66
The return on capital employed is another measure of the returns that thebusiness generates.
This is expressed as the ratio between the profit beforeinterest and taxes (PBIT) to the Capital
Employed (Loans and Owner’s Fund) in the business. The ROCE is increased to 52.45%
from 51.66% signifies that the company is gettinggood return out of its investment decisions.
The return on Total Assets is yet another method of calculating the return of the company.
This is calculated by taking the ratio between the PBIT (Profitbefore Interest and Taxes) to
the Total Assets of the company.Earning power of the company, i.e. 23.55%is quiet good and
the company isdoing well.
Comparative Balance Sheet Statement

8. Particulars
EQUITY AND LIABILITIES
Share Capital
Share Warrants &Outstanding’s
Total Reserves
Shareholder's Funds
Long-Term Borrowings
Secured Loans
Unsecured Loans
Deferred Tax Assets / Liabilities
Other Long Term Liabilities
Long Term Trade Payables
Long Term Provisions
Total Non-Current Liabilities
Current Liabilities
Trade Payables
Other Current Liabilities
Short Term Borrowings
Short Term Provisions
Total Current Liabilities
Total Liabilities
ASSETS
Non-Current Assets
Gross Block
Less: Accumulated Depreciation
Less: Impairment of Assets
Net Block
Lease Adjustment A/c
Capital Work in Progress
Intangible assets under development
Pre-operative Expenses pending
Assets in transit
Non-Current Investments
Long Term Loans & Advances
Other Non-Current Assets
Total Non-Current Assets
Current Assets Loans & Advances
Currents Investments
Inventories
Sundry Debtors
Cash and Bank
Other Current Assets
Short Term Loans and Advances
Total Current Assets
Net Current Assets (Including Current
Investments)
Total Current Assets Excluding Current
MAR'12
(₹ Cr.)
MAR'11
(₹ Cr.)
781.84
Absolute
change
%Change
773.81
8.03
1.04%
18,010.05
18,791.89
0
0
77.32
872.72
15.52
0
107.12
1,072.68
15,179.46
15,953.27
0
0
86.58
801.85
20.82
0
93.82
1,003.07
2830.59
2838.62
0
0
-9.26
70.87
-5.3
0
13.3
69.61
18.65%
17.79%
0.00%
0.00%
-10.70%
8.84%
-25.46%
0.00%
14.18%
6.94%
1,424.84
3,371.27
1.77
4,303.95
9,101.83
28,966.40
1,395.31
3,067.77
1.94
4,012.46
8,477.48
25,433.82
29.53
303.5
-0.17
291.49
624.35
3532.58
2.12%
9.89%
-8.76%
7.26%
7.36%
13.89%
0
14,144.35
5,045.16
0
9,099.19
0
2,269.26
7.49
0
0
1,953.28
1,193.61
0
14,522.83
0
12,765.86
4,420.75
0
8,345.11
0
1,322.60
10.8
0
0
1,563.30
1,146.47
0
12,388.28
0
1378.49
624.41
0
754.08
0
946.66
-3.31
0
0
389.98
47.14
0
2134.55
0.00%
10.80%
14.12%
0.00%
9.04%
0.00%
71.58%
-30.65%
0.00%
0.00%
24.95%
4.11%
0.00%
17.23%
4,363.31
5,637.83
986.02
2,818.93
136.89
500.59
14,443.57
5,341.74
3,991.32
5,269.17
885.1
2,243.24
93.26
563.45
13,045.54
4,568.06
371.99
368.66
100.92
575.69
43.63
-62.86
1398.03
773.68
9.32%
7.00%
11.40%
25.66%
46.78%
-11.16%
10.72%
16.94%
10,080.26
9,054.22
1026.04
11.33%

9. Investments
Miscellaneous Expenses not written off
Total Assets
Contingent Liabilities
Total Debt
Book Value (in ₹)
Adjusted Book Value (in ₹)
0
28,966.40
287.08
89.12
23.97
23.97
0
25,433.82
255.17
99.2
20.55
20.55
0
3532.58
31.91
-10.08
3.42
3.42
Comparative Income statement
Parameter
Gross Sales
Less :Inter divisional transfers
Less: Sales Returns
Less: Excise
Net Sales
EXPENDITURE:
Increase/Decrease in Stock
Raw Materials Consumed
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Expenses Capitalised
Total Expenditure
PBIDT (Excl OI)
Other Income
Operating Profit
Interest
PBDT
Depreciation
Profit Before Taxation & Exceptional
Items
Exceptional Income / Expenses
Profit Before Tax
Provision for Tax
PAT
Extraordinary Items
Adj to Profit After Tax
Profit Balance B/F
Appropriations
Equity Dividend (%)
Earnings Per Share (in ₹)
Book Value (in ₹)
MAR'13
MAR'12
Absolute
change
Change
%
(₹ Cr.)
42,105.51
0
0
12,204.24
29,901.27
(₹ Cr.)
35,220.89
0
0
10,073.43
25,147.46
19.55%
0.00%
0.00%
21.15%
18.90%
-65.59
9,697.02
453.02
1,257.62
1,053.51
1,049.68
1,954.62
878.92
0
16,278.80
8,868.66
825.34
9,694.00
97.96
9,596.04
698.51
8,897.53
6,884.62
0.00
0.00
2,130.81
4,753.81
0.00
-180.76
2,615.11
97.09
129.39
103.51
184.71
133.70
-78.83
0.00
3,003.92
1,749.89
141.76
1,891.65
7.95
1,883.70
97.05
1,786.65
-246.35
12,312.13
550.11
1,387.01
1,157.02
1,234.39
2,088.32
800.09
0
19,282.72
10,618.55
967.1
11,585.65
105.91
11,479.74
795.56
10,684.18
0
10,684.18
3,265.79
7,418.39
0
0
1,972.59
9,390.98
525
9.39
28.14
0
8,897.53
2,735.16
6,162.37
0
0
548.67
6,711.04
450
7.88
23.97
0.00
1,786.65
530.63
1,256.02
0.00
0.00
1,423.92
2,679.94
75.00
1.51
4.17
0.00%
20.08%
19.40%
20.38%
0.00%
0.00%
259.52%
39.93%
16.67%
19.11%
17.41%
-275.59%
26.97%
21.43%
10.29%
9.83%
17.60%
6.84%
-8.97%
0.00%
18.45%
19.73%
17.18%
19.51%
8.12%
19.63%
13.89%
20.08%
0.00%
13.89%
12.51%
-10.16%
16.64%
16.64%

10. Common size Balance Sheet Statement
Particulars
EQUITY AND LIABILITIES
Share Capital
Share Warrants &Outstanding’s
Total Reserves
Shareholder's Funds
Long-Term Borrowings
Secured Loans
Unsecured Loans
Deferred Tax Assets / Liabilities
Other Long Term Liabilities
Long Term Trade Payables
Long Term Provisions
Total Non-Current Liabilities
Current Liabilities
Trade Payables
Other Current Liabilities
Short Term Borrowings
Short Term Provisions
Total Current Liabilities
Total Liabilities
ASSETS
Non-Current Assets
Gross Block
Less: Accumulated Depreciation
Less: Impairment of Assets
Net Block
Lease Adjustment A/c
Capital Work in Progress
Intangible assets under development
Pre-operative Expenses pending
Assets in transit
Non-Current Investments
Long Term Loans & Advances
Other Non-Current Assets
Total Non-Current Assets
Current Assets Loans & Advances
Currents Investments
Inventories
Sundry Debtors
Cash and Bank
Other Current Assets
Short Term Loans and Advances
Total Current Assets
Net Current Assets (Including Current
Investments)
Mar'12
Mar'13
2.699127
0
62.17566
64.87479
0
0
0.26693
3.01287
0.053579
0
0.369808
3.703187
0
4.918941
11.63855
0.006111
14.85842
31.42203
100
3.042445
0
59.68219
62.72463
0
0
0.340413
3.152692
0.08186
0
0.368879
3.943843
0
5.486042
12.06177
0.007628
15.77608
33.33152
100
48.8302
17.41728
0
31.41291
0
7.834111
0.025858
0
0
6.743261
4.120671
0
50.13681
0
15.06335
19.46334
3.404013
9.731724
1.728175
49.86319
18.44116
0
50.19246
17.38138
0
32.81108
0
5.200163
0.042463
0
0
6.14654
4.507659
0
48.7079
0
15.69296
20.71718
3.480012
8.81991
0.366677
2.215357
51.2921
17.96057

11. Total Current Assets Excluding
Current Investments
Miscellaneous Expenses not written off
Total Assets
Contingent Liabilities
Total Debt
Book Value (in ₹)
Adjusted Book Value (in ₹)
34.79984 35.59914
0
100
0
100
Common size Income Statement
Particulars
Mar'13
Mar'12
Gross Sales
Less :Inter divisional transfers
Less: Sales Returns
Less: Excise
Net Sales
EXPENDITURE:
Increase/Decrease in Stock
Raw Materials Consumed
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Expenses Capitalised
Total Expenditure
PBIDT (Excl OI)
Other Income
Operating Profit
Interest
PBDT
Depreciation
Profit Before Taxation & Exceptional
Items
Exceptional Income / Expenses
Profit Before Tax
Provision for Tax
PAT
Extraordinary Items
Adj to Profit After Tax
Profit Balance B/F
Appropriations
Equity Dividend (%)
Earnings Per Share (in ₹)
Book Value (in ₹)
100.00
0
0
28.9849
71.0151
0
-0.58508
29.24114
1.306504
3.294129
2.747906
2.931659
4.959731
1.900203
0
45.79619
25.21891
2.296849
27.51576
0.251535
27.26422
1.889444
25.37478
100.00
0
0
28.60073
71.39927
0
-0.18622
27.53201
1.286225
3.570665
2.991151
2.980277
5.549604
2.495451
0
46.21916
25.18011
2.343325
27.52344
0.27813
27.24531
1.983226
25.26208
0
25.37478
7.756206
17.61857
0
0
4.684874
22.30345
1.246868
0.022301
0.066832
0
25.26208
7.765732
17.49635
0
0
1.557797
19.05415
1.277651
0.022373
0.068056

12. Trend Analysis
From the analysis we can see that co. isgrowing at steady rate and remarkablepoints are:
1. We can see below that company’s capital is increased by 105.33%, this is because of
issue of bonus shares in the year 2010-2011. This shows that the company’s owned
fund is increasing. Reserve and Surplus is constantly increasing which shows that the
company’s accumulated
2. Profits is increasing at a growing rate. It shows that company is making more profit.
3. By analysing sources of fund we can state that, company is more dependent on
owners fund rather than borrowed fund.
4. Investment is also growing at increasing rate. In last 4 years it has increased by
89.28%.
5. Current asset is increasing by 45.09%. This is due to increase in cash and bank
balance and other current assets.
6. Net income and expenses are increasing by 51.02% and 47.38% respectively. This
shows that the income of the co. is 3.64% higher than its expenses.

14. Cross – sectional analysis
CAPITAL
NET
NET
EMPLOYED WORTH SALES
ITC
Hindustan
Unilever
Nestle India
United Spirits
Godrej
Consumer
Products
PBIT
PBT
PAT
DIVIDEND
21661
2,674
22288
2,674
29,901.27 11,566.21 10,684.18 7,418.39 4,148.46
25,810.21 5,219.05 4,957.88 3,796.67 3,999.99
1798
6391
2761
1798
6391
2761
8,326.55
8,585.10
3,581.02
1,856.37
1,211.99
680.72
1,552.62
483.99
632.96
1,067.93 467.62
320.8
32.7
510.94
170.16